The land on which Fort Defiance was eventually established was first noted by white military men when Colonel John Washington stopped there on his return journey from an expedition to Canyon de Chelly.[2] Fort Defiance was established on September 18, 1851, by Col. Edwin V. Sumner to create a military presence in Diné bikéyah (Navajo territory). Fort Defiance was designated by the U.S. War Department to control the Navajo People upon their return from Ft. Sumner, east central New Mexico Territory. The Fort over looked and served as the headquarters of the original Navajo Reservation outlined in the 1868 treaty. It also served as a center for the Navajos to get help with restoring their lives, a place for food rationing, etc.

Fort Defiance was built on valuable grazing land that the federal government then prohibited the Navajo from using. As a result, the appropriately named fort experienced intense fighting, culminating in two attacks, one in 1856 and another in 1860. The next year, at the onset of the Civil War, the army abandoned Fort Defiance. Continued Navajo raids in the area led Brigadier GeneralJames H. Carleton to send Kit Carson to impose order. General Carleton's "solution" was brutal: thousands of starving Navajo were forced on a Long Walk of 450 miles (720 km) and interned near Fort Sumner, New Mexico, and much of their livestock was destroyed. The Navajo Treaty of 1868 allowed those interned to return to a portion of their land, and Fort Defiance was reestablished as an Indian agency that year. In 1870, the first government school for the Navajo was established there.

Today, the site of Fort Defiance is populated by buildings dating from the 1930s to the present day used by various governmental agencies including the Bureau of Indian Affairs, Indian Health Service, and the Navajo Nation. The largest of these buildings was the Fort Defiance Indian Hospital until 2002.